The American demand and supply of oranges cross at a price of $8, but all Americans are free to buy orsell oranges on the world market at a price of $5.10.What is the price Americans pay for oranges?

The American demand and supply of oranges cross at a price of $8, but all Americans are free to buy or

sell oranges on the world market at a price of $5.


What is the price Americans pay for oranges? What price do the US producers feel they are



On a demand and supply diagram show


the consumer surplus,


(US) producer surplus and


the total surplus for Americans.

One day, the U.S. government announces that it will pay $6 apiece for American oranges and will buy

as many oranges as Americans want to sell at that price. The government then takes these oranges and

resells them on the world market at $5 apiece.


Redo questions 10 and 11, using

the same diagram.


Illustrate the deadweight loss (in

the same diagram).

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